After the loss of more than 200 European Union citizens in the downing of Malaysia Airlines flight MH17, Europe may be ready to punish Russia in a way that will really hurt: restricting its access to financial markets and accelerating the flight of investment capital.
The EU presented a plan to its 28 member countries on Thursday calling for a ban on European purchases of bonds or shares sold by Russia’s state-owned banks, which play a dominant role in the country’s banking sector. Such a move would drive up the banks’ borrowing costs and “constrain their ability to finance the Russian economy,” according to a draft of the EU proposal. “It would also foster a climate of market uncertainty that is likely to affect the business environment in Russia and accelerate capital outflows.”
